What is negotiation in procurement ?
Ahmed El-Sabaa
Procurement Manager - CWJV - Monorail, Construction Engineering Diploma, PMP Preparation, RMP Preparation, CILT - Dip10 ( Sourcing and Procurement ) Certified, CSCP Candidate, Bsc
Negotiation is important within our profession. It's the communication between two or more parties with the aim of reaching a mutual agreement.
There are several reasons for negotiations:
Top negotiation tips for success
Being able to negotiate successfully isn't easy and being able to do it comes with practice. Take a look at some of our top tips to help you navigate your way through negotiation.
What are the 7 stages of negotiation?
The negotiation process can be broken down into seven main stages.
1. Preparation
The most crucial step is preparation. Without thorough preparation including research, knowing the objectives, understanding the concessions, and having a BATNA, the negotiation is unlikely to reach the optimum outcome. ?
2. Opening
This is where both parties explain what they want as a result from the negotiation.
3. Testing
This stage is where parties try and understand what is important to each other and where concessions could be made.?Effective communication and soft skills?are important at this stage. Having good listening skills allows you to gather as much information as possible, as well as the ability to read body language from the other parties.
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4. Proposing
This is where each party puts forward their proposals of what they would like to achieve, having heard the opening stage, and been involved in the testing.
5. Bargaining
This takes place when each party offers to give up something in return for something back i.e., tradeable. If one party must give something up but receives nothing back in trade, this in known as a concession.
6. Agreement
Once bargaining has been completed it is expected that an agreement can be made. Agreement must have acceptance from both parties to be legally binding.
7. Closure
The final stage is closure. This stage includes the documentation of what has been agreed whether that is a contract or minutes from a meeting. Closure is an important stage – without the documentation the agreement is open to interpretation.
What is supplier negotiation?
Supplier negotiation is the process of negotiation favourable terms are part of a new contract. You can negotiate different terms with existing suppliers or discuss terms with a brand new supplier. Negotiation is a key activity for procurement and supply professionals, and you should prepare a strategy for any negotiations.
How to negotiate with powerful suppliers
It’s important to spend time building your supplier relationships and finding mutual interests, especially if they are powerful suppliers. Find new ways to bring value to your supplier, this could be by being the gateway to new markets or finding innovative ways to reduce the supplier’s risks. Think about purchasing bundles, volumes and consolidate purchase orders, these all will help your negotiation position. Importantly, define what makes you successful and use it to your advantage.
Setting objectives with suppliers
Setting objectives with your suppliers will contribute to the success of your working relationship. Establishing smart goals keeps everyone focused, aligns efforts and drives continuous improvements, as well as setting clear expectations.